UBS: maintains "buy" rating on TOPSPORTS (06110) with a target price of HKD 6.6

UBS released a research report stating that TOPSPORTS (06110) is currently rated as a "buy" with a target price of 6.6 Hong Kong dollars. The company issued a profit warning, estimating that the profit for the six months ending in August decreased by about 35% year-on-year, falling below the bank's expectations. Management believes that the revenue decline and intensified discounts in the second half of the fiscal year are worse than in the first half, and plans to adjust the full-year guidance when announcing the midterm performance. The report quoted management as saying that the leisure product category of one major customer is under pressure, but the sales rate and discount level of new products from another customer have improved year-on-year, benefiting from inventory clearance in recent years. The report also quoted management as saying that sales from June to August were worse compared to the beginning of the year, and the situation is not expected to turn around in the short term. The company plans to expand new channels and collaborate with new brands, while closing underperforming stores and strictly controlling operating expenses. The company also pledged to pay out a dividend ratio of 100% without any special capital expenditure requirements.